ISSUES AND CONCERNS OF LDCS IN MARKET ACCESS: PROSPECTS OF BALANCED OUTCOMES

1. ISSUES AND CONCERNS OF LDCS IN MARKET ACCESS: PROSPECTS OF BALANCED OUTCOMES ICRIER International Seminar on Developing Countries and Services Negotiations 6-7 June 2006, New Delhi

2. STRUCTURE OF PRESENTATION • Where are LDCs in trade in services? • What are the challenges faced by LDCs in trade in services? • Does the current direction of market access negotiations benefit LDCs? • What is important for LDCs to see a balanced outcome in services negotiations?

3. Where are LDCs in trade in services? • LDCs are mainly net importers of services • LDC share in world trade in commercial services is 0.4% • However services features as a critical sector for achieving development objectives and can constitute 40-50% of GDP

4. Comparison of Services Imports/Exports (Selected Regions, 1980-2002) Source: South Centre, 2004, The WTO Services Negotiations – an Analysis of the GATS and Issues of Interest to LDCs

5. Where are LDCs in trade in services? • Despite low level of participation in world trade in services, Mode 4 is of particular importance to LDCs yet it remains the least liberalised and current commitments do not apply to categories of interest to LDCs • Interests do exist in sectors such as tourism, professional services (ie. outsourcing potential), construction and maintenance services, cleaning services • The ability to realise the full potential in such areas is hampered by various constraints and challenges at domestic and international levels

6. What are the challenges faced by LDCs in trade in services? Domestic level: • Lack of adequate infrastructure (eg. telecommunications) • Weak regulatory frameworks and related regimes (ie. standard setting) • Weak investment climate • Weak human resource capacity, training and development • Lack of adequate services related data and understanding of benefits and costs of services trade liberalisation • Struggling with basic necessities related to universal access in public services (ie. education, health) • Capacity issues at trade policy level due to lack of resources in identifying potential areas of interest, policy coordination and formulation and participation in negotiations

7. What are the challenges faced by LDCs in trade in services? International level: • Market access (and regulatory) barriers in mode 4 – related to recognition and qualification issues; ENTS and labor market tests; onerous visa and licensing requirements; non-transparent procedures; limitations on establishment and local presence; citizenship and residency requirements • Competition related issues (ie. global market structure characterised by domination of MNCs especially in the higher end of the value-added chain, rapid technological change) • Lack of access to financial resources; know- how capability/skills transfer and technology

8. Does the current direction of market access negotiations in services benefit LDCs? • The most recent round of offers on the table by developed countries do not reflect meaningful commercial opportunities for LDCs, clearly illustrating a development deficit: - Mode 4: same barriers remain; in most sectors committed mode 4 remains ‘Unbound’ except as indicated in the horizontal section; focus remains on the high skilled categories and in cases where new categories are being introduced, these remain subject to conditions, such as qualifications requirements. - The level of commitment tends to be lower than actual levels of liberalisation, therefore, in most cases commitments do not go beyond the status quo. -There are cases of one limitation being replaced with another. -Few existing sectors/sub-sectors of interest to LDCs are liberalised as a result of improvements to the revised offer.

9. Does the current direction of market access negotiations in services benefit LDCs? • MA negotiations are not an end itself and must be based on the objectives of the GATS laid out in the premable: - as a means of promoting growth of all and development of developing countries - for promoting interests of all on a mutually advantageous basis and securing overall balance of rights and obligations with due respect for national policy objectives - recognises the right to regulate, introduce new regulations and particular need of developing countries - for facilitating increased participation of developing countries in services trade including through strengthening of domestic services capacity, efficiency and competitiveness - taking into account difficulties of LDCs

10. Does the current direction of market access negotiations in services benefit LDCs? • It is now up to Members along with the LDCs to turn the political commitment into reality by supporting effective and expeditious implementation of the LDC Modalities • The LDCs have been active in pushing implementation of the LDC Modalities having submitted various proposals for taking it forward over 2005 which was met with little support or meaningful response • Since Hong Kong LDCs have continued to take the mandate for implementation of the LDC Modalities seriously having submitted a proposal on an Understanding on according special priority to LDCs and more recently a collective request on mode 4

11. Does the current direction of market access negotiations in services benefit LDCs? • Part of giving effect to these important objectives has been recognised in the Negotiating Guidelines and the LDC Modalities • Moreover at Hong Kong, Members gave the highest political commitment to implementation of the LDC Modalities and it is worth noting that it is the only development orientated objective of Annex C • The Hong Kong Ministerial Declaration also recognises that LDCs are not expected to undertake new commitments

12. What is important for LDCs to see a balanced outcome in services negotiations? • For LDCs, the LDC Modalities reflects the heart of their interests in the services negotiations because it is gives effect to Article IV:3 of the GATS which recognises the situation of LDCs • The current situation is that any special priority given to LDCs in MA is nullifed due to the MFN principle • Hence, Paragraph 7 of the LDC Modalities which provides that: ‘ Members shall work to develop appropriate mechanisms with a view to achieving full implementation of Article IV:3 of the GATS and facilitating effective access of LDCs services and service suppliers to foreign markets’.

13. What is important for LDCs to see a balanced outcome in services negotiations? • Implementation of the LDC Modalities (ie. Understanding on Special Priority) and Article IV is important • Assessment and review of progress of negotiations based on the Negotiating Guidelines is critical • Given the links with MA, pro-development disciplines in domestic regulation which take into account the particular situation of LDCs • Progress in rules negotiations, especially Emergency Safeguard Measure (ESM) as a safety net to safeguard national development objectives especially if MA liberalisation is undertaken • Targeted technical assistance to effectively participate in negotiations

14. CONCLUDING REMARKS • For LDCs, the services negotiations must be development centered and focus on strenghthening domestic services capacity (in line with their own national development objectives and priorities) and with a view to enhanced competitiveness and efficiency

15. THANK YOU